How Many Allowances Should I Claim? Maximum Your Federal Tax Deductions Whether You’re Single or Married

Have you asked yourself the following question:

Should I claim 0 or 1 or even 2 on my W4?

Keep on reading to find out the ideal total number of allowances you should claim.

One of the first things you do when you start a new job is to fill out your W-4.

What is a W-4 form anyways?

Formally known as the Employee Withholding Allowance Certificate, a W-4 form tells your employer how many allowances you’re claiming which determines how much federal income tax they need to deduct from your income. Deductions are also based on your earnings.

The more allowances you claim, the more money you’ll get each paycheck but, in return, you’ll receive a lower tax refund, if any, at the end of the year.

The number you claim affects your take-home amount and your refund on tax day so it’s important not to write down just any number but to assess your situation and make a smart financial decision.

This is what a W-4 form looks like:

w4 allowances tax form allowance

It has the same due date as a W-2, by April 15th.

How many allowances can I claim?

How many allowances you can claim is determined by your filing status, how many – if any – dependents you have, and how many jobs you have. If you have a software like Turbo Tax, H&R Block, or free software to file your taxes then it will help you fill this part out.

But keep in mind, that you don’t have to claim all the allowances you’re entitled to. In fact, depending on your situation, it might be in your best interest to claim 0, 1 or more than 1.

Claiming 0 Allowances

Claiming zero allowances means that the maximum amount of taxes will be withheld from your paycheck. This means that come tax season, you’ll most likely get a nice big tax refund.

When should you claim 0 allowances?

There are only a few situations where I would recommend you claim zero allowances on your W-4 form.

  • If someone is claiming you as a dependent. When someone claims you as a dependent, they get the benefit of your personal exemption. Which means their tax burden will be lowered, but yours will be a little higher which is why you should claim zero allowances. This doesn’t necessarily mean you won’t get a refund, however.
  • If you know you’re bad at saving and want to save on easy mode. Despite what some may believe, your tax refund isn’t “free money”. Getting one means you’re overpaying on your taxes every paycheck and at the end of the tax year, the IRS returns the extra money you paid. This means you can easily “trick” yourself into saving money by claiming 0 allowances and then have the IRS e-deposit the amount due into a savings account. Of course, this is not ideal, because you’re not earning interest on that money for that whole year. But it’s a great way to force yourself to save.

Claiming 1 Allowance

Claiming 1 allowance means that a little less tax will be withheld from your paycheck than if you claimed 0 allowances.

Here’s when I would recommend you claim one allowance.

  • If your filing status is single this is the safe choice. If you are just an individual and barring any complicated tax situations, you’ll most likely still receive a refund. Though it will be smaller than if you claim zero allowances. This is the most common number of allowances claimed

Claiming 2 Allowances

You probably know the drill by now. Claiming two allowances means even less tax will be withheld from every paycheck.

Here are the situations in which you should claim two allowances:

  • If you’re not married and you want to get as close as possible to break-even as possible (getting a $0 tax refund). However, depending on your tax situation, you may end up owing a little bit. If your financial health is good, this is the number of tax allowances I recommend that you claim.
  • If you have two jobs and your filing status is single, you’ll end up filling out a W-4 for each job. You can claim 1 allowance on each W-4 OR you can claim 2 allowances on one W-4 and 0 on the other.
  • If you’re married with no kids. If you file jointly, you can claim two allowances. One for you and one for your spouse. Not sure if you should file jointly or file separately? Here’s a good primer by TurboTax.

Claiming 3 Or More Allowances

You can claim more than 2 allowances with your spouse if you have one child or more. Basically, you get one allowance per child so:

  • Claim 3 allowances if you’re married and have 1 child
  • Claim 4 allowances if you’re married and have 2 children
  • You can guess the rest

Can I claim 99 allowances?

You technically can claim 99 allowances BUT you definitely shouldn’t. According to the IRS, 10 million people underpaid their taxes in 2015 and ended up having to pay a hefty fine – they have to pay what they owed, plus interest, and a fine. This has personally happened to me when I accidentally underreported my income (it was my first year doing taxes!) and therefore underpaid my federal income tax.

Income tax is a pay-as-you-go tax which means you can’t wait until the end of the year to give all your taxes as a lump sum. You have to either withhold enough tax from each paycheck or make quarterly estimated tax payments. Withholding your taxes by filling out a W-4 form with the correct amount of allowances is the easiest way to avoid underpaying.

So should I claim 0 or 1 allowance?

Most people claim 1 or 2 allowances

As I mentioned earlier in this article, depending on your specific situation, it may be beneficial to not claim as many allowances as you’re entitled to.

The more allowances you claim, the less tax is withheld. This is a good situation to be in if you’re in good financial health – as long as you don’t end up owing too much tax.

But, if you’re living paycheck to paycheck and don’t have any kind of emergency fund, then claiming fewer allowances than you’re entitled to may be a good option. This means you’ll be receiving less each paycheck but at the end of the year, you’ll receive all the extra money that was withheld as a lump sum.

You can use your tax return to build up your emergency fund or to pay off any consumer debt. You’re basically forcing yourself to save money from each paycheck. Just don’t treat it as a “bonus”.

You have to decide for yourself whether you want to “fool” yourself into savings or not by claiming extra allowances.

Can I change my W-4 allowance?

You can change the number of allowances you claim at any time. Just fill out a new W-4 and give it your employer.

There are some life events that happen which change the number of allowances you should claim. Getting married and having a kid are the two most common of these life events.

Tax Resources

I hope I answered your question of:  should I claim 0 or 1 on my W-4?

Still unsure about how many allowances you are entitled to?

One of the best tools to use to figure out how many W-4 allowances you should claim is the IRS Withholding Calculator, which will also help you figure out how the amount of tax withheld by your Employer.

You should also check out IRS Publication 505. It’s the official instructions from the IRS to determine your allowances and estimating your taxes.

TurboTax also has a great suite of tax tools which can help you with a variety of tasks including calculating how many allowances you can claim.

2019 W4 Guide

Form W-4 Tax

Filling out your W4 can be a fairly simple process. As I mentioned earlier in the article, the purpose of the W4 is to designate the amount of tax withholdings that your employer should take from your paycheck.

If you don’t fill out your W4 correctly, or if you don’t take the right number of claims, you could overpay income taxes or worse, underpay income taxes.

Neither of these situations are ideal, so knowing the right way to fill out your W4 can be vitally important for your pocketbook now and into the future.

It can be easy to fill out the W4 form, if you take some time to read and understand the withholding and deductions information.

However, if you have never filled out one of these forms, it can be confusing the first time. I felt it was important to give some helpful information on how to fill out the 2019 W4 form. Keep in mind this information is only applicable for 2019 form, the form for 2020 may have new requirements.

The IRS has provided a personal allowances form that you should use to assist you in filling out the allowances section of the W4.

Remember, the number of allowances you take, will change the amount of withholdings that are taken from your paycheck. The fewer allowance, the more amount of your paycheck that is tax withheld.

Most people claim 1 or 2 allowances. This will ensure that you provide enough income tax, without substantially overpaying.

However, if you need more money to stay in your paycheck, and you have kids or a spouse to support, it may be logical to claim more than these common allowance amounts.

On the flipside, if you have other income, that isn’t subject to income taxes (for example your spouse works as a contractor and uses a 1099 form), you may want to consider keeping your allowance at 1, or claiming 0 on your tax form may be appropriate.

The personal allowances worksheet that comes with your W4 is a great way to calculate your allowances. However, many people find that this tool is difficult to understand.

There are lots of other resources on the internet to help you decipher the personal allowances worksheet, and there are lots of calculators that will help you as well.

To help you through this process, I’ve come up with a step-by-step guide to filling out your W4 form and the personal allowances worksheet.

  1. Start with your name. This is pretty easy, and it should feel intuitive. However, many individuals forget that you must use your legal name, or the name associated with your social security number. Don’t use nicknames or aliases. Also, remember, if you’ve gotten married and changed your name, you need to update this form with the correct information.
  2. Your social security number. Again, pretty obvious. If you are a contractor, or need to claim taxes for a business, do not use the W4, you’ll need to use a 1099 and your EIN. The W4 is for individuals working as a regular employee only. If you’re filling this form out, use your social security number only.
  3. Address – Use the same address that you would associate with your tax filings.
  4. Marital Status – If you’re single, indicate so. If you’re married and file joint taxes, then indicate so. If you’re married, but file separate taxes, mark “married but withhold at higher single rate”.
  5. Allowances – This section is confusing, and you should follow the personal allowance worksheet to ensure that you calculate the right number of allowances. If you find that this form is confusing, websites like TurboTax and even the IRS have handy calculators that you can use. Just remember, if you claim too many allowances, you may risk underpayment and if you claim to few, you may overpay.

There are three different worksheets that come in the personal allowances section of the W4 form. We’ll cover these more in-depth in the Personal Allowances section of this article. However, here’s some basic information to help you with filling out the form.

The first section of the worksheet is for personal allowances. If you are filing as an individual, this form is pretty straight forward, enter one in line A.

If you have a spouse, or have children, you’ll need to fill in lines B through G and then calculate the number of allowances in line H. Don’t be surprised if the number is pretty big. You’ll adjust this number further on the Two-Earners/Multiple Jobs worksheet.

The calculation from line H, if you are filing as an individual, will be used in box 5 on the W4. If you have a spouce, you’ll need to use line H on the Two-Earners form, on line 1. If you have multiple jobs, or both you and your spouse work, you’ll need to do further calculations on the Two-Earners form.

After you’ve entered the number of deductions from like H on your personal allowances form to the line 1, you’ll need to find the adjustment factor for the lowest paying job in the household. This number is found in table 1 of the worksheet.

Enter the adjustment number in line 2. Then, subtract line 2 from line 1, only if line two is less than line 1. If line 2 is more, you’ll need to enter “0” in box 5 of the W4 form, and calculate the withholdings using Table 2 and the calculations found on the two income form, lines 4 through 9. This amount will then be entered on the W4 in box 6.

If you follow the instructions on the worksheets, or use an online calculator, you should be able to correctly calculate the right number of withholdings.

Personal Allowances

Personal Allowance

The IRS has provided a personal allowances form that you should use to assist you in filling out the allowances section of the W4.

Remember, the number of allowances you take, will change the amount of withholdings that are taken from your paycheck. The fewer allowance, the more money that is withheld.

Most people claim at least one allowance. Claiming one on your W4, will ensure that you pay enough income tax, without substantially overpaying. However, if you need more money to stay in your paycheck, and you have kids or a spouse to support, it may be logical to claim more than one allowance.

On the flipside, if you have other income, that isn’t subject to income taxes (for example your spouse works as a contractor and uses a 1099 form), you may want to consider keeping your personal allowance low, at either 1 or 2, on your tax withholding form.

However, it’s a good idea to use the personal allowances worksheet provided with the W4 to make the correct claim.

Just remember, if you’re claiming fewer allowances than you need, you’ll have less money in your pocket each month. And while a larger tax return is a nice surprise, the real goal with your income tax withholdings is to just give the right amount, with no refund and no tax bill.

One question that I am often asked is how to make a personal allowances worksheet. Of course, this is a possibility, and spreadsheet programs like

Excel or Numbers (for you Apple fans), are a good way to create your own calculator. However, you’ll probably spend more time creating your own worksheet, than it would take to find and use one already available on-line.

It’s also important to understand that the tax code changes each year, and so do the W4 withholding forms. If you create your own personal allowances calculator, you’ll have to understand the tax code, and update your calculator each year. Again, it may not be worth your time to go through this effort, with so many options available on the internet.

I’ve compiled a list of some of the most intuitive personal allowance calculators that are available on the internet. Keep in mind, some of these are created by companies that sell tax preparation products, so they may try and sell you their wares, if you don’t love these kind of websites, there are plenty of other options on-line, you’ll just need to do your research.

IRShttps://www.irs.gov/individuals/tax-withholding-estimator

This is probably your best bet. Get the right number, from the source. It is pretty simple to follow, and in theory, if you provide the right information, you should get the right withholding number each year. I ran the calculator for my income, and what I did find is that instead of providing a number of allowances, it provided me with a dollar amount. You can use this number on the W4 in box 6 instead of an allowances number.

TurboTaxhttps://turbotax.intuit.com/tax-tools/calculators/w4/

Similar to the IRS calculator, this one will tell you how much withholdings to expect with each paycheck, and how that payment, falls into the category of under or overpayment. The nice thing about this calculator is that it actually takes into account some of the common tax deductions like mortgage interest and student loan or tuition payments. H&R Block has a very similar calculator.

Bankrate https://www.bankrate.com/calculators/tax-planning/payroll-tax-deductions-calculator.aspx

This calculator isn’t as intuitive as the ones from the IRS or TurboTax/H&R Block. However, it isn’t from a company trying to sell you something, or the federal government, so it might be more appealing to some users.

Can I Claim 2 on my W4?

Claim 2 on my W4

It certainly is appropriate to claim 2 on your W4 form in many cases. If you are married and filing jointly and you both are employed, and you have kids to claim as tax credit, the personal allowance worksheet may tell you that 2 is the right number of allowances for your situation.

Note: Tax credit actually reduces the amount you owe, while tax deducations affects how much is taken from you by your employer.

Two allowances, is actually the recommended number of allowances for most couples.

However, just because the personal allowance worksheet tells you that you that 2 allowances is the right claim, you may want to claim more or even less, than what is recommended.

Keep in mind, and I mentioned this earlier in this article, there are some benefits and downfalls to claiming more or less.

If you need to keep a bit more money in your monthly paycheck, you may want to claim more, and this can be handy for those that are living paycheck to paycheck, but this is a potential tax liability if you are claiming too much.

Just keep in mind that claiming more allowances than you are actually entitled to, may mean a hefty tax bill at the end of the year.

If you don’t want to risk a tax bill, you may want to pay more taxes now, and claim fewer allowances. This will likely result in a larger tax return, which can easily be deposited into a savings account or used for other expenses.

Keep in mind however, your tax contributions aren’t a good “savings account”, there are better ways to save money, than to pay more each month in taxes.

Can I Claim Exempt?

If you are tax exempt it means you are not subject to any withholdings and you will keep all of your paychecks. However, knowingly lying is tax fraud and you may be subject to penalty. Only claim tax-exempt if the government gave that status to you last year. If you’re not sure, don’t claim exception – there can be some dangerous financial ramifications.

What is the average number of claims on W4?

Average Claim on my W4

According to H&R Block the average number  of claims on a W4 is 2.5.  However, we do know that 0 and 1 are really popular options for people with a variety of tax situations.

It seems that lots of people, though able to take more allowances on their taxes, choose to take fewer than they should or could. In fact, on average most people are eligible for an additional 1-2 claims. If you have a kid or are in an education program then you can put a higher number down.

There is certainly some concern about that unexpected tax bill at the end of the year, and if you’re living on a budget, it might be easier to take a reduction in your monthly income, that you plan around, than try to figure out how to pay a tax bill come April 15th since in that case you’ll have to pay out of pocket to pay your taxes.

Getting a tax return is another reason that 0 and 1 claims are so popular. The reality here is that paying too much in taxes is just as impractical as not paying enough.

However, many would much rather overpay, and get a refund, than try to save money each month, or do the work to have neither a refund or a tax bill at the end of the year. Of course this is the ideal situation, but so frequently tax payers see the refund as a great savings opportunity.

What to do when you’ve underpaid your taxes?

underpaid your tax

Underpayment of your taxes isn’t a great situation to be in.

First of all, no one loves to cut a check to the Federal government on April 15th.

With so many people living paycheck to paycheck, a tax bill can be a huge burden, especially if you have limited savings.

Furthermore, depending on the amount you’ve underpaid, you may be subject to tax penalties, or required to pay quarterly payments the following tax year which is a huge tax liability. No matter how you look at it, a tax underpayment is not a good thing. Here are some steps you can take if you underpaid your taxes.

  1. Don’t skip making your tax payment – This can result in more penalties, and a larger tax bill in the future. The first thing you need to do when you’ve underpaid your taxes, is to make sure you resolve the issue and pay your tax bill.
  2. Pay any penalties – If your underpayment is substantial, you may be assessed penalties. It’s a hard pill to swallow, but make sure you pay any penalties that may be assessed. Failing to pay penalties may result in legal action. The cost to hire a tax attorney will certainly be more than any tax penalties that you’ve assessed.
  3. Consider quarterly tax payments – This may be a suggestion or required depending on how much you underpaid. If you’re underpayment is small, you may just need to adjust your W4. However, if your underpayment is substantial, you may be required to make quarterly tax payments to resolve any future underpayments. Regardless, you’ll still be paying income taxes on your monthly pay, on top of any quarterly payments.
  4. Adjust your W4 – Once you know how much you’ve underpaid, you’ll probably want to go back and adjust your form  W-4 with your employer. It’s important to remember that you can adjust your W4 at any time in the year, and you can change it as frequently as you would like.
  5. Consult with a tax professional – If you’ve been doing your own taxes, and you aren’t sure why you ended up with an underpayment, it might be time to hire a professional. Until you get your tax situation back in order, a trained tax professional can guide you through the steps you need to take to avoid underpayment and potential penalties in the future. Taxes can be confusing, and so can the W4, so if you’re not sure what to do, find a professional to help. They can help you figure out how much you actually owe and maximize your deductions.

While any accountant will tell you that the goal with income taxes is to have neither a bill nor a refund, it’s a much easier pill to swallow to take more taxes out over the year, than to pay a big tax bill in April.

Adjust your allowances accordingly, so that you can eliminate the worry of underpayment in the future.

Do claims affects your credit score in any way?

credit scores

The general answer to this question is, no.

The amount of allowances or claims that you take on your W4 will not impact your credit score directly.

The IRS doesn’t report your tax bill or your withholdings to the credit bureaus.

However, the amount you claim can have an indirect impact on your credit score, especially if you underpaid your taxes, and have a large tax bill in April.

If you don’t have enough savings to take care of your tax bill, you may need to rely on mechanisms to pay your taxes that can directly impact your credit score however. Some people rely on personal loans or credit cards to fund their tax bill come tax time. While these can ease the burden of a large, one-time tax bill, by spreading the payments out over time, they can also have negative impacts on your credit score.

Taking out loans can reduce your available income or increase your debt to income ratio. This can have a negative impact on your credit score.

The same is true if you’re paying a large tax bill on a credit card. Using a large portion of the available credit on a card can reduce your credit utilization ratio, and reduce your credit score. Using a credit card for your tax bill is a safe option if you plan on paying off the debt quickly. However, this isn’t often the case.

Another way that your credit score can be impacted by your W4 claims is if you don’t pay your tax bill or penalties. In this case, the IRS may impose a Tax Lien on your property or wages.

Tax liens will be reflected on your credit report, and can have a substantial negative effect on your credit score. If you do underpay your taxes, it is never a good idea to avoid payment.

The last way that your claims could indirectly impact your credit score, is if you should have to file bankruptcy to handle a tax bill, tax penalties, or a tax lien.

Bankruptcies can sit on your credit report for an extended period, and can have a long lasting impact on your credit score and credit report.

If you should find yourself with a large underpayment, and you want to avoid the potential credit score implications by taking out a loan or using a credit card, contact the IRS. While we all think they are scary, believe it or not, they do understand that hardship happens.

The IRS can work with you on a payment plan to help you work through your tax bill in a manner that is more affordable. You may even be able to get a reduction in your tax bill by working with the IRS.

These options are great because they help you resolve your underpayment, while at the same time, protecting your credit score, and leaving your credit available for other expenses or needs.

Finally, remember, if you’ve ended up with a big tax bill, and you want to avoid the potential credit report burdens in the future, take the time to adjust your W4 claims.

This is the best way you can avoid the potential tax bill, and keep the IRS out of your checkbook and your credit score.

FAQs

Is it better to claim 1 or 0?

It is better to claim 1 if you are good with your money and 0 if you aren’t. This is because if you claim 1 you’ll get taxed less, but you may have to pay more taxes later. If you do you’ll have to address this out of pocket and if you didn’t save up enough you may have to wait to take care of your tax bill.

If you put 0 you’ll be taxed more but are much more likely to get a refund. Some people prefer putting 0 because they don’t have to worry about saving money for their tax bil and would rather get less money now and a tax-refund check later.

What does it mean to claim an allowance?

The more allowances you claim on your W4 the less income will be held back by your employer and the more money you will get in your paycheck. The most common allowances to claim involve being a full time student, a dependent (if someone claims you as a dependent, often children), or marriage status. 

While you can claim as many as you want there can be consequences to not paying enough taxes. You may have to write a check to the US Treasury when it comes time to do your taxes, and if you owe $1000 or more you will be hit with an additional fee due to a “large misrepresentation of taxes”. Waiting multiple years to pay it off can also result in you paying interest.

How many allowances do I claim on w4?

You want to claim the amount of allowances on your W4 that is honest – the average is 2.5. Don’t aim to claim a specific number. The more honest you are the less surprises you will have come tax day.

Can I claim more than 10 allowances?

You certainly can claim more than 10 allowances, but if you are falsely claiming them then you will owe the US Treasury & Government money. How much depends on the difference between how much you should actually claim. The more false claims you make the more you’ll owe and you will likely have to additional taxes on April 15, in addition to fees.

What is claiming 2 on taxes mean?

Claiming 2 on taxes means you are claiming 2 allowances on taxes. The average number to claim is 2.5. The higher the number you are claiming the less your employer withholds from your paycheck. However, when you file your taxes if you claimed a higher number than you are supposed to you will have to pay taxes on that amount.

What is the maximum tax refund you can get?

There is no dollar amount when it comes to the maximum you can get. It is relative to how much you make and how many allowances you didn’t claim. The more you make and less allowances you claim (minimum of 0) will enable you to have larger tax returns.

Do you get a bigger tax refund if you make less money?

You do not necessarily get a bigger tax refund if you make less money. The amount you get is directly proportionate to how much money you make and how many claims you could have, but didn’t make.

If you make more money you are eligible for a larger tax refund (because it is proportionate to your income). The less claims you make the more likely you are to get a higher proportion of your money back as a tax refund.

Will tax returns be bigger in 2020?

Tax returns will not change in 2020. However, there will be a slight change in income tax brackets which could affect the amount of money you get from a tax return, depending on your new bracket.

 

Doing Your Own Taxes This Year and Made Less than $66,000 in 2018?

Here’s how you can file your federal AND state taxes online completely free!

How many allowances do you claim? Are you planning on changing the amount soon?


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